Bond Valuation

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The nominal value of 10% bond is Rs.100. The redeemable value is Rs.120 in two years. Investor's expected rate of return is 14%. What should be the value of bond?

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The company needs to earn income of Rs.7.38 crores on 100 crores to earn its target return after paying management expenses of 10% of amount of income generated.What is the gross amount to be earned?

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YTM of convertible bond = 10.76%. Yield of comparable bond is 9%. What is the spread of yield of convertible bond from that of comparable bond?

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A company issues a variable bond where interest rate changes based on prevailing interest rates. Bond was issued when interest rate was 10%. It has remaining life of two years and the interest rate is now 8%. What will be the value of bond today if face value is Rs.1000?

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You have invested in 8.5% bond with face value of Rs.1,000. Reinvestment rate is 10 percent and has 3 years to maturity. What is the reinvested interest on this bond

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Duration of portfolio is 8 years. Yield is expected to increase in current year. Which action should be taken by the investor?

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The current market price of bond is Rs.140. Bond is convertible into 20 shares. At what price should the investor opt for conversion?

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11% preference shares of Rs.100 is currently quoted at yield of 13%. What should be the current market price?

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Net depreciated value of mortgage assets should be twice the value of debt. Company currently has debt of Rs.8 Crores and mortgaged assets of Rs.30 Crores. New debt taken will be deployed 50 percent towards purchase of mortgaged assets. How much debt can the company raise?

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10% bond was issued with life of 10 years. There was a clause to redeem/extend the bond by 5 years at the end of year 5. Interest rates at end of year 5 is 12%. What action will be taken by company at end of year 5?

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10% bond pays interest in september and March of every year. Face value is Rs.100. YTM is 12%. What will be current market price with balance life of 2 years?

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Duration of half-yearly bond = 5.85 years ; YTM = 10%. What will be the volatility of bond?

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Volatility = 4.5. Yield is expected to increase by 25 bps. What will be the effect on current market price?

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Bond was issued 5 years ago with flotation cost of Rs.30 lacs. It has balance life of 25 years. Tax rate is 30%. Bond is to be replaced with new bond. What will be tax benefit on flotation cost?

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Face value of bond = Rs.200 lacs; Call premium = 10%. Balance life = 10 years. Tax rate = 20%. What will be the tax benefit on call premium?

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10% Govt of India security is quoted at 125 (Face value of Rs.100). Yield is expected to go up by 1 percent. What will be the revised price?

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MP as on Jan 1, 2019 = Rs.100. Face value of Rs.100 and interest rate is 10%. Interest is payable half-yearly on June 30 and December 31. What will be price of the bond on Oct 1, 2019?

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Treasury bill rate = 9%; Discount rate for A rated bond = T bill rate + 3%;
Discount rate for AA rated bond = AAA rate + 1%
Discount rate for AAA rated bond = A rated bond - 2%. What should be the discount rate for AA rated bond?

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YTM of perpetual bond = 8%. What is its duration?

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Life of annuity bond = 4 years; Interest rate = 12%; Face value = Rs.1,000. What will be the annual cash flow?

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1 year interest rate = 10 percent; 2 year interest rate = 12 percent; What will be the forward rate of year 1?

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CMP of T-bill on March 31= 95,000. Maturity date = July 20; Face value = 1,00,000. What is the yield on treasury bill?

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Duration of Bond A = 4 years; Duration of Bond B = 10 years; Investor needs money after 6 years. What should be the investment in Bond A and Bond B?

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Interest rate on Bond = 10%; YTM of bond = 12%; what will the bond quote at?

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14% bond is quoted at Rs.90. what is current yield if interest is payable half-yearly?

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CMP of bond = Rs.1,000
Interest rate on bond = 12%
YTM of bond = 15%
What will be the price at end of year 2?

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Discount rate for year 1 = 10%
Discount rate increases by 2% per year.
What will be the PVF for year 3?

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The company plans to issue 10% debentures. Yield on similar debenture is 15%. The company plans to issue in such a manner it gives 18% return to investors. What should be the discount rate for valuation of bond?

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Issue price of bond = Rs.80;
Redemption value in year 5 = Rs.120
Face value of bond = Rs.100
Interest rate on bond = 10%
Tax rate on interest = 30%; Tax rate on capital gain = 20%
What will be the post-tax cash flow of year 5?

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Current interest coverage = 4 Times.
EBIT will increase by 20% and interest will increase by 40%. What will be the revised interest coverage?

Chartered Accountancy Strategic Financial Management Quiz on Bond Valuation, created by Dinesh Jain on 01/11/2019.

Bond Valuation

The nominal value of 10% bond is Rs.100. The redeemable value is Rs.120 in two years. Investor's expected rate of return is 14%. What should be the value of bond?

The company needs to earn income of Rs.7.38 crores on 100 crores to earn its target return after paying management expenses of 10% of amount of income generated.What is the gross amount to be earned?

YTM of convertible bond = 10.76%. Yield of comparable bond is 9%. What is the spread of yield of convertible bond from that of comparable bond?

A company issues a variable bond where interest rate changes based on prevailing interest rates. Bond was issued when interest rate was 10%. It has remaining life of two years and the interest rate is now 8%. What will be the value of bond today if face value is Rs.1000?

You have invested in 8.5% bond with face value of Rs.1,000. Reinvestment rate is 10 percent and has 3 years to maturity. What is the reinvested interest on this bond

Duration of portfolio is 8 years. Yield is expected to increase in current year. Which action should be taken by the investor?

The current market price of bond is Rs.140. Bond is convertible into 20 shares. At what price should the investor opt for conversion?

11% preference shares of Rs.100 is currently quoted at yield of 13%. What should be the current market price?

Net depreciated value of mortgage assets should be twice the value of debt. Company currently has debt of Rs.8 Crores and mortgaged assets of Rs.30 Crores. New debt taken will be deployed 50 percent towards purchase of mortgaged assets. How much debt can the company raise?

10% bond was issued with life of 10 years. There was a clause to redeem/extend the bond by 5 years at the end of year 5. Interest rates at end of year 5 is 12%. What action will be taken by company at end of year 5?

10% bond pays interest in september and March of every year. Face value is Rs.100. YTM is 12%. What will be current market price with balance life of 2 years?

Duration of half-yearly bond = 5.85 years ; YTM = 10%. What will be the volatility of bond?

Volatility = 4.5. Yield is expected to increase by 25 bps. What will be the effect on current market price?

Bond was issued 5 years ago with flotation cost of Rs.30 lacs. It has balance life of 25 years. Tax rate is 30%. Bond is to be replaced with new bond. What will be tax benefit on flotation cost?

Face value of bond = Rs.200 lacs; Call premium = 10%. Balance life = 10 years. Tax rate = 20%. What will be the tax benefit on call premium?

10% Govt of India security is quoted at 125 (Face value of Rs.100). Yield is expected to go up by 1 percent. What will be the revised price?

MP as on Jan 1, 2019 = Rs.100. Face value of Rs.100 and interest rate is 10%. Interest is payable half-yearly on June 30 and December 31. What will be price of the bond on Oct 1, 2019?

Treasury bill rate = 9%; Discount rate for A rated bond = T bill rate + 3%; Discount rate for AA rated bond = AAA rate + 1% Discount rate for AAA rated bond = A rated bond - 2%. What should be the discount rate for AA rated bond?

YTM of perpetual bond = 8%. What is its duration?

Life of annuity bond = 4 years; Interest rate = 12%; Face value = Rs.1,000. What will be the annual cash flow?

Treasury bill rate = 9%; Discount rate for A rated bond = T bill rate + 3%;
Discount rate for AA rated bond = AAA rate + 1%
Discount rate for AAA rated bond = A rated bond - 2%. What should be the discount rate for AA rated bond?

CMP of bond = Rs.1,000
Interest rate on bond = 12%
YTM of bond = 15%
What will be the price at end of year 2?

Discount rate for year 1 = 10%
Discount rate increases by 2% per year.
What will be the PVF for year 3?

Issue price of bond = Rs.80;
Redemption value in year 5 = Rs.120
Face value of bond = Rs.100
Interest rate on bond = 10%
Tax rate on interest = 30%; Tax rate on capital gain = 20%
What will be the post-tax cash flow of year 5?

Current interest coverage = 4 Times.
EBIT will increase by 20% and interest will increase by 40%. What will be the revised interest coverage?